Real Madrid have reportedly tabled a world record bid for Mbappe of around £113million.
The 18-year-old set Ligue 1 and the Champions League alight when he burst onto the scene early last season.
Isco has starred for Real towards the end of the campaign due to the absence of Gareth Bale through injury.
The midfielder is out of contract at the end of next term and Marcotti thinks his game time could be reduced if Mbappe is brought to the club.
"In terms of what else Real Madrid have to do, I think the priority has to be to get Isco locked into a longer term contract," he said on ESPN FC.
Gabriele Marcotti thinks Kylian Mbappe could affect the future of Isco if he signed for Real Madrid Real Madrid line-up next season with Kylian Mbappe Fri, May 5, 2017
Click through the gallery for a possible Real Madrid line-up next season with Kylian Mbappe
Play slideshow Getty Images 1 of 11
GK: Keylor Navas
ou have to carve out a space for Isco and if Kylian Mbappe comes to Real Madrid, it's going to be even tighter
Gabriele Marcotti on Real Madrid star Isco
"He said 'look, I'm happy to sign' I think the issue is his wages.
"I also think it is to some degree his playing time and maybe Mbappe fits into that as well because obviously Isco has to play somewhere and you've got (Gareth) Bale, you've got (Luka) Modric, you've got (Cristiano) Ronaldo, you've got (Karim) Benzema, you've got Toni Kroos.
"You have to carve out a space for him and if Mbappe comes, it's going to be even tighter."
Get Quotes on Home Insurance
However, Marcotti is not certain Real Madrid have bid what has been reported, and has suggested it could be Monaco putting together a package for potential suitors.
Gabriele Marcotti thinks Real Madrid's bid for Kylian Mbappe should be taken as a rumour
"Personally my gut would be that something is a little screwy here in the sense that Mbappe said he would only really consider a move if he can get first-team football," he added.
"He's a very sensible kid and that's what he needs at this time.
"Sometimes and we often see this there are people who like to put a deal together and go to clubs at the end and say 'look, everything's pre-packaged, you just need to put that €135million on the table', rather than Real Madrid actually making a bid.
"I think we have to treat it as a rumour right now until we get confirmation, it would be extraordinary I think."